Quality pays off.
C. Jackson Grayson Jr., chairman of the American Productivity and Quality Center, uses the example of a frog in water to demonstrate the difference in attitudes between the two countries: Take a frog and put it in a shallow pan of scalding water, and it will jump out; put the same frog in tepid water over a low flame, and it will sit calmly and gradually boil to death. The Japanese realized it had to jump; the United States is slowly boiling to death.
The nations has a $3.8 trillion debt, more money than any other country. Income has not kept up with inflation since 1973. For the first time, American families are comfronting a generation of children whose standard of living is worse than their parents'. These warning signs are the steam behind the drive for quality.
To bolster America's competitive position, the Washington, D.C.-based Council on Competitiveness is developing steps to improve quality in all industry sectors. The group of business, labor and academia leaders has banned together to help U.S. companies compete effectively in world markets. The Council's 25-member executive committee is led by George M.C. Fisher, Chairman and CEO of Motorola Corp., the first winner of the U.S. Commerce Department's Malcolm Baldrige National Quality Award. American consumers' opinions of the quality of U.S. products have improved, according to the American Society for Quality Control. However, foreigners do not hold U.S. products in high regard. American businesses are going to have to try even harder if "Made In The USA" is to become a symbol of world-class quality.
To meet this quality challenge, BLACK ENTERPRISE assembled this special section to define and measure what quality is and to offer strategies for putting quality goals and principles into action.
Demystifying What Quality Means
Quality means different things to different people. After all, traditional economic thingking didn't embrace the concept of quality. There was price, but not quality. This explains why until recently America's graduate business schools barely taught about quality.
The need for quality didn't arise until American industry faced an expanding worldwide marketplace where its goods and services lost their competitive edge. Even when the 1980 landmark television documentary, If Japan Can, Why Can't We? looked at the issue of industrial productivity, at not time during the program did the word quality come up.
"All we knew then was the productivity drove standard of living and America's productivity rate had been steadily falling since the early '70s," says Clare Crawford-Mason, who along with Lloyd Dobyns produced the documentary. "Now we realize the quality is what drives productivity."
Part of understanding quality is knowing the hisotry of what happened with Japan. "It's not that Americans were doing anything wrong, it's just the Japanese were doing it better," says Crawford-Mason, coauthor with Dobyns of the book Quality or Else: The Revolution In World Business (Houghton Mifflin Co., Boston, $21.95).
Ironically, the quality control methods the Japanese learned were taught by Americans. Quality guru W. Edwards Deming, deemed a prophet without honor in his own land, is generally given much of the credit for the Japanese industrial miracle.
Why didn't the United States seize the idea of quality when the Japanese did? "We were busy making quantity, not quality," says Crawford-Mason. "We did what our customers wanted. We got the product to them quickly, even if that meant the car had to be assembled at the dealership and taken back three times."
Moreover, management had been misled to believe that implementing quality cost more. But in fact, the Japanese were selling better cars and producing better stereo systems for less money then American counterparts.
These days the common denominator demands that quality mean the best possible at the lowest possible price. In fact, quality products cost less to produce. A large percentage of a company's gross sales goes to poor quality--as measured by repars, rework and scrap costs, returned goods, warranty costs, inspection costs and lost sales. A.T. Kearney Inc., an international management consulting firm in Chicago, reports that in the late 1980s the cost of poor quality was estimated at 10% to 20% of sales dollars in the average U.S. company. Or two to four times its profit. The average U.S. manufacturing company was spending 25% of its sales dollars fixing quality problems. In the service industry, up to 40% of operating costs were spent on the same kinds of problems.
Ultimately, poor quality holds down the price companies can charge for their goods and services. Losing just one unhappy customer costs as much as five times the annual value of that customer's account. American businesses now realize that consumers want better quality and that they are willing to pay for it.
Quality means redefining corporate culture so that everyone from manager to worker to supplier is equally committed to producing and delivering grade A products and services. Satisfying customers, never being satisfied with the current level of quality and constantly seeking innovation. Quality isn't hard to define. Putting it into practice, that's the rub. Some experts contend that quality is something 10% of people understand, 805 are learning and the other 10% will never grasp. Companies are struggling to adopt quality principles. They know all the buzz-words: zero defects, conforming to requirements, meeting specifications, fitness for use, continuous improvement and absence of variation.
The mistake companies most often make is to seek a formula for achieving quality through one guru's theoretical model of a single-case study, Patrick L. Townsend and Joan E. Gebhardt say in their book Quality In Action (John Wiley & Wons Inc., New York, $24.95). "Their thingking is that you can follow a series of logical steps and 'presto you have quality," state Townsend and Gebhardt.
But quality is a strategy. It addresses two interlocked questions: Are we doing the right things and are we doing things right? It's possible to do the wrong thing right and the right thing wrong. "The way to achieve quality is to do it right the first time," says Philip B. Crosby, chairman of Career IV, an executive consulting firm in Maitland, Fla. The basis of what Crosby has taught for 40 years is "zero defects."
In a nutshell, explains Crosby, zero defects is the answer to the question: "How many babies is it okay for a nurse to drop?" Crosby further explains that quality is conformance to requirements--giving the customer what you promised each and every time. The system is prevention. The performance standard is zero defects. The measurement is money--how much it costs to do it wrong instead of getting it right the first time.
The thrust of Deming's quality philosophy is "continuous improvement" where nothing is ever good enough and the job is never over. Deming employs statistical quality control (SQC), a system widely used during World War II. SQC is a way of analyzing avoidable and unavoidable errors. The goal is to eliminate variations in materials, parts and the finished product during design and production.
Essentially, continuous improvement means as you get smarter you get better, concedes Crosby, "It doesn't mean you make 10 mistakes this week, six next week and three the following week."
While Deming focuses more on detection and correction, both he and Crosby preach prevention. In the past, most companies conducted inspections. But this only meant that if any defects were found, the product had to be fixed.
Prevention isn't just about eliminating defects but eliminating nonvalue-added work, ways Blanton Godfrey, chairman of Juran Institute, founded by quality guru J.M. Juran in 1979. "We've found that wasted time is a bigger problem than defects in most companies. This is a part of doing things right. For instance, the cost of a car would be cut by 20% if automobile companies didn't try to sell features that not every customer wants."
Juran uses the phrase "fitness for use" to explain the two sides to quality, the market side and freedom-from-failure side. The market side goes beyond zero defects to discovering why someone buys a products. For instance, you can walk into any retail store and find different models of VCRs. They all work, but why do some sell while others don't? Freedom-from-failure, he says, allows you to buy a car and regardless of whether you buy a Toyota or a Cadillac, the car will start, stop and get you where you're going without breaking down.
And employees Inc Sync
The guiding principle at most companies today is to develop systems to economically produce goods or services that satisfy customer requirements. To carry this out effectively requires a companywide quality improvement program.
Yet, around the country, the talents and abilities of many employees are still not being fully utilized. More than 36% of employees in U.S. companies where a quality improvement program is in place do not participate, according to a 1990 survey from the American Society for Quality Control," Quality: Everyone's Job, Many Vacancies." The study of some 1,237 employees also shows that one out of every four workers was dissatisfied with the results of his or her company's quality program.
The responsibility for quality rests on the plant floor but in the front office. "If a company has a quality problem, 95% of the fault is with management," says Richard Buetow, vice president and director of quality control at Motorola Inc. To help workers do their jobs better, the Schaumburg, Ill., electronics giant spends $70 million a year on employee education. Nearly 40% is targeted at quality training.
Quality at Motorola, which employs 100,000 employees worldwide is defined as error-free production and total customer satisfaction. The firts-year winner of the Commerce Department's Malcolm Baldrige National Quality Award in 1988 is striving for total perfection through Six-Sigma quality, equivalent to 3.4 defects for every product, process and service. In the last five years, the company has cut defective products 80% and saved $962 million in inspection and rework costs.
But Motorola has learned about quality the hard way. The company was forced to reinvent itself when it lost its competitive edge to the Japanese, who were selling less expensive and better pagers, cellular phones and semiconductors. In 1981, after talking to customers world-wide, management called for a 10-fold improvement in quality by 1986. "We had the choice of continuing to lose customers to Japan or do something about it," says Robert Galvin, executive committee chairman of the board of directors. But becoming a quality company has paid off. Since 1984 total sales grew from $5 billion to $11.3 billion.
Since the mid-'80s, General Mills has moved forward with a different approach to manufacturing its more than 300 kinds of packaged foods. The company employs high-performance work systems to improve productivity and product quality. Essentially, "we cut the layers of management on the assembly lines and instead went to the team concept," says Craig Shulstad, a company spokesman. "Our employees are organized into teams and given responsibility for nearly all aspects of production." Employees develop skills through cross-functional training. The same employee might operate equipment, perform quality control tests or do maintenance and sanitation work. Employees even participate in job interviews with candidates seeking to join their prospective teams.
Federal Express Corp., a 1990 Baldrige winner, uses an evaluation system in policy-making. Called SFA (survey, feedback, action), it involves a survey of employees, analysis of employee work groups and discussion between workers and management to develop written action plans. In addition, employees are given the information and technology needed to improve performance. A digitally assisted dispatch system (DADS) communicates with 30,000 couriers via screens located in their delivery vans. And some 90,000 Federal Express employees at more than 1,000 sites worlwide process 1.5 million shipments daily, all of which are tracked by a central information system.
At Delta Air Lines, quality in performance and the workplace is ingrained in each of its 77,000 employees--from the pilots in the sky to the maintenance crew on the ground. For 17 straight years, until 1991, Delta was named the No. 1 customer service airline in the nation by the Department of Transportation. Last year, they were barely ousted by Southwest Air Lines. "We had .50 complaints per 100,000 passengers and their's was a fraction lower," explains Neil Monroe, communications specialist for the Atlanta-based airline. Still, Delta's record shows quality is a priority. "Our first goal is safety, our second is quality," Monroe says.
Company loyalty--reflected in its no-layoff history--is reciprocated. For instance, in 1982 when the company showed a loss, the employees chipped in and bought a new Boeing 767 aircraft, which cost $30 million. "Now that's pulling together through the bad times as well as the good," says Monroe.
Superb Manufacturing Inc., Detroit, has provided its clients quality assurance since its inception seven years ago. The BE INDUSTRIAL/SERVICE 100 company is a major parts supplier to the big three U.S. automobile manufacturers--General Motors Corp., Chrysler Corp. and Ford Motor Co.
Prevention is key to quality improvement at the metal-stamping company, owned by former NBA player and Detroit steel giant Dave Bing. "Since it is much cheaper to prevent a problem than fix it when it occurs," says quality assurance manager, Jim Betty, "part of the planning process involves having a formal meeting with customers and documenting the important characteristics of any product. Superb conducts performance evaluations of its product prior to full-scale production."
Part of quality control at Superb is the ability to trace and retrieve its product. "So, if customers complain about a particular part, we can determine which coil of steel that part was made out of," Betty says.
Little things mean a lot at Superb." The gains you make from month to month or day to day add up," notes Betty.
"Quality is intergrating excellence into marketing, manufacturing, planning, research and development and into our relationships with our customers, suppliers and among ourselves, says Edgar S. Woolard Jr., chairman and CEO of Du Point in Wilmington, Del. The chemical giant has 133,000 employees worlwide, who can take advantage of seed grants to build the prototype of an invention they have in mind or to test a new product or service. Moreover, Du Pont has a myriad of programs, such as its Quality Management and Technology Center and the Center for Creativity and Innovation, to enhance quality in the workplace and in its products.
Goals Into Action
Any company that limits quality to fancy slogans and cursory goals is destined for disaster, no matter how well-intended the effort. Quality improvement is specific and systematic, says Joshua Hammond of the American Quality Foundation. "It involves identifying the most critical problems and solving them one at a time, starting with the most important one first." This is not a quick fix, warns Hammond. It could take a couple of years to figure out what works well or how to get it right the first time. Remember: What works for one company may not work for another.
The American Quality Foundation, in conjunction with the accounting from Ernst & Young, put out the International Quality Study, which compares the quality management practices of four countries: Canada, Japan, Germany and the United States. "One of the most disappointing findings was that not a single quality strategy has become habitual within any U.S. industry," says Hammond. "No company did the same thing 90% of the time." The significance of this finding is that quality comes from constantly monitoring and improving the entire system, Hammond says.
But ultimately, "companies have to design quality into the product and the process and not just add a few people at the end of the assembly line" says Kent H. Hughes, president of the Council On Competitiveness (COC), Washington, D.C.
Quality improvement starts at the top. Senior and middle management must lead; the entire work force must be involved. This may mean restructuring, especially at larger companies that have built up layers of bureaucracy. Divisions may be broken down into smaller business units. Putting training programs into effect is also crucial, say the COC's Hughes. Indeed, companies are spending about $750 million a year on third-party quality materials, training and consulting, according to The Boston Consulting Group Inc.
Employee empowerment is imperative. Workers must be given greater authority and responsibility. With that will come a higher level of accountability. Many companies now use team structures for problem solving and performance improvement. Equally important is how information is disseminated. Every employee ought to be able to answer the key questions: Who are our major competitors? What are the company's strengths and weaknesses versus its competitors? How is the company performing in respect to sales and profits? Who are our target customers? What type of needs and expectations do they have and how satisfied are they with our service?
Every quality process has measurement systems to tell a company where it is and where it is going. Internal and external tools are employed to assess quality--from checklist and flow charts to customer surveys and employee feedback. Thousands of U.S. companies use the Malcolm Baldrige National Quality Award criteria to assess their processes, measure progress and improve quality. Indeed, 250,000 award applications were placed in the hands of managers last year. Moreover, American businesses now benchmark their performance against the best-in-the-class among their competitors. In fact, the American Productivity & Quality Center (APQC) has an international benchmarking clearinghouse.
Quality improvement, of course, is not just for manufacturing companies. Service companies--hoteliers, retailers, education and government agencies, health care centers and financial institutions--can all benefit from quality improvement programs.
In addition to revising measuring systems, more companies are tying senior-management compensation to quality performance. Employees who produce 50% more than standard, for instance, may get a 50% bonus. Other companies are giving awards. For example, Orchem Inc., a chemical specialty firm in Blue Ash, Ohio, is the 1991 recipient of Miller Brewing Co.'s "Partners In Excellence" award. Founded by NBA legend Oscar Robertson in 1981, Orchem supplies process control and sanitation products to Miller, a subsidiary of Philip Morris Cos. Inc.
There is no final stage, no finish line, no end point with quality improvement. The old idea behind high-volume standardized production was to meet specifications and then keep repeating the process. The new school of thought is to constantly review, reassess and adjust the process and then set new and higher targets.
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|Title Annotation:||Business Management; includes related articles|
|Date:||Jun 1, 1992|
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